Everything You Need To Know About Rural Development Loans in Virginia

Rural development loans in Virginia can be a great option for purchasing or renovating a home in a rural area. These loans are backed by the United States Department of Agriculture (USDA) and offer many advantages for eligible borrowers. In this comprehensive guide, we will cover everything you need to know about rural development loans in Virginia.

What is a Rural Development Loan?

A rural development loan also known as a USDA home loan is a mortgage loan program backed by the USDA to promote homeownership in rural and suburban areas. These loans require no down payment and flexible credit requirements, making them accessible to low-to-moderate income borrowers.

The rural development loan program includes

• Single family housing direct loans
• Single family housing guaranteed loans
• Single family housing repair loans and grants

In Virginia, the most common type of rural development loan is the guaranteed loan, which is provided by USDA-approved lenders and backed by the USDA.

Benefits of Rural Development Loans in Virginia

There are many advantages to getting a rural development loan in Virginia, including:

• No Down Payment Required – You can get 100% financing and not have to put any money down. This makes it easier for first-time homebuyers to afford a home.

• Low Fixed Interest Rates – Interest rates on rural development loans are very competitive, allowing for low and affordable monthly payments.

• No Minimum Credit Score – There is no specific minimum credit score needed. Each applicant is reviewed case-by-case.

• No Maximum Income Limits – Income limits are based on the area median income, not your specific income. Higher incomes may be possible.

• Flexible Credit Requirements – There are flexible credit standards, allowing those with less than perfect credit to still qualify.

• No Mortgage Insurance – There is no monthly mortgage insurance premium like with conventional loans.

Am I Eligible for a Rural Development Loan in Virginia?

To be eligible for a rural development guaranteed loan in Virginia, you must meet certain criteria:

• The home must be located in an eligible rural area as defined by the USDA property eligibility tool. Generally, cities with populations under 20,000 are eligible.

• Annual household income must be within the income limits set for each county and household size. The limits range from $60,000 to $123,600.

• Have an acceptable credit history. Each case is reviewed individually.

• Be unable to secure traditional credit with reasonable rates and terms.

• Be a U.S. citizen, U.S. non‐citizen national, or Qualified Alien.

• Homebuyer education is required for first-time homebuyers.

• The property must meet USDA habitability standards and requirements.

How Much Can You Borrow with a Rural Development Loan in Virginia?

There is no maximum loan amount for Virginia rural development loans. The amount you can qualify to borrow will depend on your income, debts, credit score and ability to repay the loan.

In general, your total monthly mortgage payment, including principal, interest, taxes and insurance, needs to be 29% or less of your gross monthly income. This is known as the payment-to-income ratio.

The USDA has a loan calculator tool to help determine how much you may be able to borrow.

How Do I Apply for a Rural Development Loan in Virginia?

Here is the general process to get a rural development guaranteed loan in Virginia:

1. Determine your eligibility using the USDA Income and Property Eligibility tools.

2. Find a USDA-approved lender to apply through. Ask the lender if they handle USDA loans.

3. Complete a loan application with required documentation such as tax returns, pay stubs, and credit report.

4. The lender will submit your application to the USDA through the Guaranteed Underwriting System (GUS).

5. If approved, you can move forward finding a home and making an offer contingent on financing.

6. Once under contract, the lender will order an appraisal, finalize loan approval, and set closing.

7. At closing, you’ll sign final loan documents and get the keys to your new home!

It’s a good idea to get pre-approved to know your loan amount and have a smoother home buying process.

What Areas are Eligible for Rural Development Loans in Virginia?

Rural development loans can only be used for homes in approved rural areas. Eligible areas include:

• Open country areas with populations under 2,500
• Communities between 2,500 and 10,000 population
• Small cities and towns between 10,000 and 20,000 population

Specifically in Virginia, eligible areas include suburbs and small towns throughout the state. Cities like Richmond, Virginia Beach, Chesapeake, and Alexandria are not eligible.

You can check a specific property address using the USDA Property Eligibility tool.

Final Thoughts on Rural Development Loans in Virginia

Rural development loans offer a great opportunity for low-to-moderate income homebuyers to purchase a home with no downpayment and flexible credit requirements. They make it possible for many first-time homebuyers to finally achieve their dream of homeownership.

In Virginia, these USDA-backed loans are available in communities throughout the state, provided the home is in an eligible rural area. With competitive interest rates and 100% financing, they can be a real game-changer for purchasing or renovating a home.

If you feel a rural development loan is right for you, connect with a USDA-approved lender to get the process started. They can guide you through all the steps to successfully apply for and close on your new home loan.